The Coca-Cola Company and FEMSA: Contracts
The Coca-Cola Company (TCCC) and FEMSA have significant influence in the conduct of the business of Coca-Cola FEMSA, TCCC’s largest distributor.
TCCC indirectly owns 27.8% of Coca-Cola FEMSA’s outstanding shares, representing 32.9% of the voting capital stock of this subsidiary.
In addition, The Coca-Cola Company has the right to appoint up to five out of a maximum of 21 directors and the vote of at least two of them is required for the approval of certain actions of Coca-Cola FEMSA’s board of directors.
FEMSA indirectly owns 47.2% of Coca-Cola FEMSA’s outstanding shares, representing 56.0% of the voting capital stock of this subsidiary.
FEMSA has the right to appoint up to 13 out of a maximum of 21 directors and all relevant executives.
Together, TCCC and FEMSA, or FEMSA alone in certain circumstances, may determine the outcome of all actions requiring approval of Coca-Cola FEMSA’s board of directors, and FEMSA and The Coca-Cola Company together, or FEMSA alone in certain circumstances, have the power to determine the outcome of all actions subject to approval by Coca-Cola FEMSA’s shareholders.
The Coca-Cola Company
Pursuant to its bottling agreements, Coca-Cola FEMSA is prohibited from bottling or distributing any beverage without the authorization or consent of The Coca-Cola Company and may not transfer bottling rights with respect to any of its Territories without the prior consent of The Coca-Cola Company.
In addition, The Coca-Cola Company makes significant contributions to Coca-Cola FEMSA’s marketing expenses even though it is not obligated to contribute any particular amount, and The Coca-Cola Company may discontinue or reduce those contributions at any time.
Coca-Cola FEMSA depends on The Coca-Cola Company to maintain its bottling agreements.
These agreements automatically renew for 10-year periods, subject to the right of either party to give prior notice of its desire not to renew any agreement.
Generally speaking, any of these contracts may be terminated in the event of a material breach.
The majority of Coca-Cola FEMSA’s sales are derived from sales of Coca-Cola trademark beverages, which are owned by The Coca-Cola Company.
Maintaining the reputation and intellectual property rights of the Coca-Cola and other Coca-Cola FEMSA brands is fundamental to attracting and retaining customers and consumers, as well as a key factor for the success of this subsidiary.
Concentrate prices used for Coca-Cola Brand Beverages are determined by The Coca-Cola Company as a percentage of the weighted average retail selling price in local currency net of applicable taxes.
